Indonesia: Owens Illinois subsidiary assets frozen since July

The assets of the Indonesian subsidiary of Owens Illinois, the world“s largest maker of glass containers, have been frozen by a court since July 2005. The case, which relates to a terminated contract…

The assets of the Indonesian subsidiary of Owens Illinois, the world“s largest maker of glass containers, have been frozen by a court since July 2005. The case, which relates to a terminated contract worth just USD 1 million a year, is hurting efforts by President Susilo Bambang Yudhoyono to improve the climate for foreign investors in south-east Asia“s largest economy. Owens Illinois acquired Kangar Consolidated Industries (KCI) in 1998 as part of its takeover of Kangar“s Australian parent company, ACI Glass Packaging. KCI is a major supplier of glass bottles to Indonesian beverage producers, with 33% of the local market and exports amounting to 25-30% of its production, primarily to Australia. Since February 2005, however, KCI has been involved in a dispute with Multi Inti Trada, a local distributor, over KCI“s cancellation of a one-year contract, allegedly because of late payments by the distributor and other issues. The dispute, according to informed sources, led to Multi Inti Trada filing a IDR 30 billion (USD 3 million) lawsuit in May 2005. In July 2005, KCI“s assets were frozen by court order. “The matter is under adjudication. But it is this kind of frustrating case that hurts the business climate here,” said James Castle, a Jakarta-based business consultant who is advising KCI. A lawyer for Multi Inti Trada company told The Jakarta Post newspaper the distributor had repeatedly sought an amicable resolution to the dispute and that the order to freeze assets was a normal legal procedure in Indonesia.